By Leika Kihara and Makiko Yamazaki
The Bank of Japan raised interest rates to a 31-year high on Tuesday, marking another landmark step in normalising monetary policy as it focused on taming price pressures from the energy shock caused by the Iran war.
The hike was the first since December and aligns the BOJ with other central banks shifting towards tighter policy to combat inflation, including the European Central Bank.
Deputy Governor Shinichi Uchida acknowledged the recent U.S.-Iranian peace deal, which he described as a “welcome move”, but noted persistent inflationary risks.
“Compared with the previous meeting, the risk of a sharp deterioration in the economy has diminished. On the other hand, price rises are broadening and there is a risk underlying inflation may deviate from our target,” Uchida said in a news conference he held on behalf of Governor Kazuo Ueda, who missed the meeting for medical treatment.
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